Arthur Hayes, a seasoned crypto trader and co-founder of Bitmex, recently provided some enlightening perspectives on the primary drivers fueling the ongoing bull market. He elucidated how increasing sovereign debt, currency depreciation, and the escalating appeal of cryptocurrencies as a hedge against fiat currency devaluation interconnect.
During the prolonged bear market from 2021 to 2023, some traders basked in their recent victories, like profiting from Solana’s sudden rise. However, the true crypto legends, according to Hayes, are those who embraced the “Left Curve” philosophy. This means buying and holding cryptocurcies, particularly Bitcoin, as the bull market starts picking up momentum.
Currency Debasement and Institutional Investment: Catalysts for Crypto Surge
Hayes explored how countries like the United States, China, the European Union, and Japan intentionally weaken their currencies’ value to manage their government debts. He added that conventional financial institutions could capitalize on this trend by investing in Bitcoin ETFs for profit.
Due to the potential for currency devaluation, these institutions are advising their customers to shield their assets’ value by investing in cryptocurrencies. In turn, this heightened institutional interest fuels the ongoing cryptocurrency market growth, reinforcing the notion that digital currencies offer a viable hedge against fiat currency decline.
Understanding Nominal GDP and Its Impact on Economic Policies
Hayes explains the concept of nominal Gross Domestic Product (GDP), which includes inflation and real growth. He argues that governments borrow money to fund projects, hoping to boost economic growth and attract investors with promising yields. However, politicians often manipulate the system by keeping government bond yields lower than GDP growth rates. This allows them to spend more without raising taxes, but it leads to bad investments and economic stagnation. As a result, bond yields become distorted, and central banks print more money to reduce the government’s debt.
In addition, he shared that when the true returns on government bonds dip below zero, these investments become less appealing for investors. As a result, they may look towards other assets, such as cryptocurrencies like Bitcoin, which have a limited supply and are not affected by inflation or currency devaluation, to generate higher returns.
The Bitmex co-founder argues that the contentious US political climate, especially ahead of the 2024 presidential election, is likely to exacerbate this trend. As both major parties compete for control and propose expensive initiatives, the motivation to preserve low real returns and enable unrestrained borrowing will grow stronger.
Don’t Leave the Left Curve
When summer draws near, a crypto trader suggests to his team that they take advantage of market slumps and new token introductions to smartly build up their holdings. In his article, he emphasized:
“Now is an ideal moment to seize the current crypto price drop and gradually increase your holdings. Regardless of which type of crypto risk appeals to you, the upcoming months offer a precious chance to expand your positions.”
He firmly believes that the larger trend of currency devaluation and excessive money printing will persist, driving the cryptocurrency market upward. Those who adopt the “Left Curve” mindset and stay committed to their investments are likely to reap the rewards.
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2024-04-24 13:42